HONG WEI (ASIA) HOLDINGS CO LTD v. THE REGISTRAR OF COMPANIES

HCMP 1418/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1418 OF 2016

____________

________________________

D E C I S I O N

________________________

1. I have before me an originating summons issued on 6 June 2006 by the Company, for an order that the time for delivering to the Registrar of Companies for registration a return in the specified form of its allotment of 177,780,000 ordinary shares on 8 January 2014 be extended to 27 October 2015 pursuant to section 45 of the Companies Ordinance (Cap 32).

2. Section 45 provides that whenever a company limited by shares makes any allotment of shares, the company shall within 1 month deliver to the Registrar for registration a return in respect of the allotment stating the number and nominal amount of the shares comprised in the allotment and other information specified in the section.

3. On 8 January 2014 the applicant was listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited by way of a placement.  It was in these circumstances that the shares to which I have referred came to be allotted to 300 investors.  The listing and the allotment was announced on the Exchange’s website.  As is apparent from the application, the Company failed to comply with section 45 and return the required form recording the allotment and the required details to the Registrar. 

4. The reason given in the affirmation in support of the application for an extension of time by Leung Wai Ling Wylie, the company secretary, is that due to her various work commitments at the time, she overlooked the requirement to return the allotment.  It is not suggested that she was unaware, at least in general terms, of the requirement to inform the Registrar of the allotment of shares. 

5. This mistake came to light following the delivery of a return of a subsequent allotment to the Registrar on 30 June 2015.  Because the information at the Registry was incomplete, the Registrar wrote on 8 July querying the information with which it had been provided in the June return.  This led to the Company, through its solicitors, identifying the earlier omission and providing to the Registrar a return of allotment in respect of the January allotment of shares.

6. According to Ms Leung, the Company assumed that that was an end to the matter.  No evidence has been filed explaining whether Ms Leung or any other officer of the Company took the trouble to look at the terms of section 45 and appreciate that, as a result of the breach of section 45, the Company and its officers were liable to prosecution.  Neither is there any evidence explaining whether advice was sought or proffered by the Company’s solicitors, who one would have expected, were aware that section 45 had been breached

7. In April 2016, the Companies Registry issued a summons in Eastern Magistracy in respect of the omission to deliver a return of allotment.  A plea should have been taken on 11 May 2016 but the hearing was adjourned because by that time the present application had been issued.  The Magistrate adjourned the hearing until after the application had been determined.

8. Section 45(3) gives the court a discretion to extend the time for delivering a return of allotment if the court is satisfied that the omission “was accidental or due to inadvertence or that it is just and equitable to grant relief”.  It seems to me that the relevant facts and considerations can be divided into three stages for the purposes of an assessment of whether this is an appropriate case to grant an extension of time.

9. The first is the circumstances in which the original omission took place; the second is the circumstances in which the omission came to light and the action that was subsequently taken; the third is the impact of the issue of the summons in Eastern Magistracy. 

10. I accept that the omission to deliver the return in January 2014 arose as a result of an accident.  If an application to extend time had been made shortly after the one‑month time period had expired, I anticipate that an extension of time would have been granted.  However that did not take place.  What is not in my view adequately explained (this goes to the second stage) in the evidence is why once the omission came to light in July 2015, steps were not taken by the Company to seek an extension of time.  This seems to me to be a consideration that weighs against the court exercising its discretion. 

11. The third consideration is the fact that the summons had been issued and the matter had come on for the taking of a plea before the hearing before me, although the plea was not in fact entered.  It seems to me that generally, and I expressed similar sentiments in my decision in Re China Unicorn, HCMP 2106/2015 (22 September 2015), it will only be in special circumstances that the court should grant an extension of time after a summons has been issued in particular if a plea has been taken, or in the normal course of events would have been, taken.

12. Generally speaking by that stage the criminal court has been seized of the matter, and it being likely that the delay having been considerable and, as in the present case, the omission only coming to light and steps being taken to remedy it by the Company after it has received the summons, it will generally be inappropriate for the Companies Court to grant an extension of time. 

13. It seems to me that there are no circumstances in the present case which justify the court exercising its discretion given the fact that a summons has already been issued, and it appearing to be only the fact that the summons was served that caused the Company to finally pay sufficient attention to its precise obligations under section 45 and obtain the necessary legal advice. 

14. I will therefore dismiss the originating summons and make an order that the applicant pay the Registrar of Companies costs, with a gross sum of assessment of the costs in the sum of HK$5,000.